Correlation Between Stepstone and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both Stepstone and Iridium Communications at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Stepstone and Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stepstone Group and Iridium Communications, you can compare the effects of market volatilities on Stepstone and Iridium Communications and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Stepstone with a short position of Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stepstone and Iridium Communications.
Diversification Opportunities for Stepstone and Iridium Communications
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stepstone and Iridium is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Stepstone Group and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications and Stepstone is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Stepstone Group are associated (or correlated) with Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of Stepstone i.e., Stepstone and Iridium Communications go up and down completely randomly.
Pair Corralation between Stepstone and Iridium Communications
Given the investment horizon of 90 days Stepstone Group is expected to generate 0.91 times more return on investment than Iridium Communications. However, Stepstone Group is 1.1 times less risky than Iridium Communications. It trades about 0.17 of its potential returns per unit of risk. Iridium Communications is currently generating about 0.05 per unit of risk. If you would invest 3,578 in Stepstone Group on September 3, 2024 and sell it today you would earn a total of 3,011 from holding Stepstone Group or generate 84.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stepstone Group vs. Iridium Communications
Performance |
| Timeline |
| Stepstone Group |
| Iridium Communications |
Stepstone and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stepstone and Iridium Communications
The main advantage of trading using opposite Stepstone and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepstone position performs unexpectedly, Iridium Communications can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Iridium Communications will offset losses from the drop in Iridium Communications' long position.| Stepstone vs. Munivest Fund | Stepstone vs. Blackrock Muniyield Quality | Stepstone vs. Federated Investors B | Stepstone vs. Federated Premier Municipal |
| Iridium Communications vs. IHS Holding | Iridium Communications vs. Cogent Communications Group | Iridium Communications vs. IDT Corporation | Iridium Communications vs. Cable One |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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